Tuesday, October 19, 2021

The curious case of Evergrande’s billionaire founder

By Shennan Guo

Hui Ka Yan is one of China’s most wealthy billionaires – but his wealth has been rattled by his finances, the deteriorating health of his Hong Kong-listed company, Evergrande, and a high-profile bribery case.

This sprawling developer has made its billionaire founder one of China’s wealthiest with record profits, and pushed up house prices across China by prolific apartment building, but that’s not how it was supposed to end.

The 53-year-old billionaire businessman first raised his profile with an eye-catching distribution of cash to Beijing civilians in November 2008.

As wealthy parents lined up in freezing temperatures with their children, the then-29-year-old said he would give away money to anyone who didn’t need it, to celebrate his re-election as chairman of China’s premier state-owned conglomerate, the China National Chemical Corporation.

In 2017, Mr Hui admitted he had acted as a “proxy” for a senior member of the military, a “salami-slicer” of sorts, who embezzled money and disappeared, evidence of which eventually emerged in the trial for the high-profile industrialist Guo Wengui, who claimed to expose “corruption at the highest levels”.

Later that year, Evergrande’s shares were suspended amid doubts over the company’s finances. Hong Kong police were investigating Mr Hui’s chief financial officer for suspicious dealings. And the same year, two of Mr Hui’s sons were questioned over a multimillion-dollar property purchase. In the wake of this, Mr Hui himself announced he was stepping down from his post as chairman.

Now what?

Mr Hui has accused the Communist Party of meddling in his privatisation deals, of which the Red Envelope Hefei Port Sutor Boao Coal Mine IPO is yet to take place. The development was supposed to give him a beachhead for a new family trust, which promised to create a tier two private wealth management platform. But investors have turned their backs, raising doubts over his future.

Meanwhile, Evergrande’s shares collapsed following the arrest of an American executive in August for allegedly stealing internal files and another executive’s unit allegedly received repeated warnings about money laundering and bribery. The business is facing insolvency and the lender, Mizuho, is expected to close Evergrande’s main bank account.

The company also announced a merger with a vehicle valued at up to $70bn to create the country’s largest property firm by market value. But Evergrande’s debts are already at about $13bn, more than four times its market value, and so far the company has refused to recognise some of its debts.

Since the scandal, Evergrande has resorted to selling land at a steep discount and to sell 3,800 apartments. But all this has yet to curb the ever-growing debt mountain, which is more than a third of its total valuation, leaving shareholders worried. Mr Hui told the media that “solving our troubles” is his main focus.

Despite all this, when the firm unveils its full-year results, Mr Hui is expected to keep his multi-billion-dollar net worth intact, even though Evergrande might appear to be on a slippery slope.

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